• US-China tensions might ease if Xi visits the US
• China’s PMI data expected to show economy is stabilizing
• Despite property market crisis, iron ore demand is expected to remain strong

The Australian dollar has been stabilizing over the past month around the 0.6340 level, which means if king dollar is ready for a pullback, a rally towards 0.6500 could unfold.  The key for the Australian dollar might be if the outlook for China improves.  The property crisis isn’t going away anytime soon, but we could be seeing some progress with a minor de-escalation with US-China tensions.  If a Xi-Biden summit occurs, we might not see an escalation in tensions, which could provide a minor boost for both economies.  No breakthroughs are expected regarding Taiwan, China’s relation with Russia, and with removing any of the existing tariffs.  A resumption of regular economic dialogue between the world’s two biggest economies would not only provide a boost in sentiment but it could lead better growth prospects in 2024.

AUD/USD Daily Chart

The Australian dollar was expected to stabilize on both end-of-month and -quarter flows.  If  the end of week China’s PMI data shows the economy is stabilizing given the limited stimulus efforts, which would benefit the manufacturing side a bit more than services.  Strong growth in construction is still expected and that should prove supportive for Australian commodities.  If AUD/USD is at the beginning of a substantial recovery, upside targets might eye the 0.6590 level followed by 0.6675.

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